Chip & Pin: What Is It and How Does It Work?

Starting from the 1st of July 2017, Chip & PIN cards will be accepted for transactions in Malaysia and signature verification will no longer be the standard procedure.

This has led to major changes in how payment card transactions work but understandably, there are some among us who are still coming to terms with the switch.Don’t worry if you find the new system overwhelming! This article is going to help you understand:

WHAT a chip & PIN system is & HOW it is different

HOW the change affects you as a business owner

WHAT you can do to help your business adapt

Chip & PIN: General Info

Chip & PIN is a government-backed initiative to implement the PIN number as a verification method for smart payment (credit and debit) cards.

The biggest change that the Chip & PIN system brings is that transactions no longer require signatureauthorisation. Instead, a payment is confirmed when the cardholder inputs their PIN into a payment processing terminal.

The new system is meant to improve security measures and prevent the use of stolen credit or debit cards for purchases.This is because for transactions above a certain amount, the cardholder must be able to key in the PIN number to confirm the payment.

For many who are reading this at the moment, the big question is…

How this affects you as a merchant & business owner

Let’s take a closer look at how chip & PIN works compared to the previous card-payment system.

In the previous card payment system, merchants could ignore the POS terminal prompt for the customers’ PIN. This is called PIN bypass.It allows the customer to complete the payment using their verified signature.

However, starting from 1st July 2017, Malaysian banks will no longer accept the PIN bypass or signature verification.

Transactions made at POS terminals that do not support PIN verification WILL BE DECLINED automatically. Merchants and business owners MUST update their POS software to comply with the new chip & PIN system.

Those who do not switch to the new system will be held responsible for any cases of fraud when processing card-payment transactions without chip & PIN.

How can my business adopt the new system?

Update your software/hardware:You need to update your POS terminal software to enable PIN verification. In certain cases, you might also need a change in hardware to support the new system.

Ensure your new card reader is legitimate:You need to make sure that your card reader is a PIN-enabled and certified piece of hardware. If you have doubts about whether or not a machine meets the requirement, don’t buy it.

Plan ahead:In most cases, the process to switch to the new system, including paperwork and hardware/software upgrades, may take up to 3 weeks. Plan ahead so your business doesn’t suffer.

Inform your customers: It is a good idea to help your customers understand how the new system works. You could put up signs near the counter, or post notices about the system change on your social media sites to help consumers get used to the new system.

Other important things to note:

For transactions below a certain amount, PIN input may not be necessary

PIN input may not be necessary for foreign/internationally-issued cards

Contactless payment, such as VISA payWave, will require PIN verification if it exceeds a certain amount

Understand the system and stay ahead of the game

With this major adjustment happening in the industry, now would be a great time to upgrade your POS system to stay ahead of your competitors.

In some F&B outlets, customers often pass the cashier their card and wait at their table to sign the transaction receipt.However, unlike the previous card payment system, a Chip & PIN transaction requires the cardholder to be present at the terminal to complete the payment process.

You can either have the customer come to the cashier counter to complete the card payment or get an edge over your competitors by switching to a wireless, portable terminal for the convenience of your customers and to save time.

For example, if you’re running a restaurant, imagine how much better the customers’ experience would be if they could use their payment cards from the very table they’re dining at! You would also save time as your employees won’t need to keep moving back and forth between the customers’ tables and the cashier counter during the payment process. It’s a win-win situation!

Still in the market for a Chip & PIN solution that is just perfect for your business?

What’s more, there are no monthly fees or long-term contracts required, making the application process quick and smooth. The only payment required is the low one-time fee for the card reader itself. You can go here for more information or contact your customer success (or sales manager) immediately.

Be prepared

The change to a Chip & PIN payment system can feel like a huge adjustment. If you’ve made the proper preparations and obtained industry software and equipment, your business will be more than ready to start tapping into the potential of the Chip & PIN payment system – and the new market landscape!